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From Bailout to Bankruptcy

Updated March 22, 2002 12:01 a.m. ET

In 1999, for political reasons that had nothing to do with economics and less with long-term employment prospects, German Chancellor Gerhard Schroeder brow-beat German banks into rescuing construction giant Philipp Holzmann. Yesterday, Holzmann announced it was filing for bankruptcy, becoming Germany's biggest corporate failure ever. It's hard to find a clearer example of why government directed bailouts, indeed any sort of industrial policy, are such a bad idea.